Have real interest rates really fallen that much in Spain?

• Autores: Roberto Blanco Escolar, Fernando Restoy Lozano
• Localización: Documentos de trabajo - Banco de España, ISSN 0213-2710, Nº 4, 2007, págs. 9-25
• Idioma: inglés
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• Resumen

  • This paper analyses the behaviour of real interest rates in the Spanish economy over the last 15 years. Since inflation-indexed-bonds are not available, changes in implicit real interest rates are estimated using several approaches suggested by macroeconomic and financial theory. In particular, we employ equilibrium conditions of a representative agent under several specifications of preferences. Moreover, we exploit no-arbitrage conditions in securities markets. The evidence we report indicates that inflation uncertainty could account for a notable part of the observed decrease in nominal rates. Consequently, the actual real cost of financing might have decreased significantly less than what the course of ex-post real rates would suggest.